Shares of A.G. Barr fell as much as 4% on Tuesday after the firm said adjusted profit before tax rose 13.3% to £43.5 million in year ended January 29 — but warned it now anticipates “a short-term impact on operating margins.”
Barr is the Cumbernauld-based owner of Irn-Bru, Rubicon energy drinks, Funkin cocktail mixers, MOMA Foods and Boost Drinks.
Barr also announced that after 62 years with the business, Robin Barr will not to seek board re-election at the AGM in May.
The firm said Julie Barr will relinquish her company secretarial duties and join the board as a non-executive director, subject to shareholder approval.
Barr’s reported revenue rose 18.2% to £317.6 million and full year dividend rose 9.2% to 13.1p.
Barr CEO Roger White said in his outlook: “Over the past 12 months we delivered an excellent financial performance and made significant progress across our strategic objectives, an achievement only made possible by our committed and hardworking teams.
“Our strategy to build and develop a multi-beverage portfolio capable of significant long-term growth is progressing well.
“We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead.
“We do anticipate a short-term impact on operating margins, as a result of the combination of this investment, ongoing inflationary cost pressures, and the initial dilutive impact from the Boost acquisition.
“This growth and investment phase will support the rebuilding of our operating margin over the medium term and the creation of a stronger and more sustainable business.”
REACTION:
Victoria Scholar, Head of Investment, Interactive Investor: “A.G. Barr reported a 13.3% increase in full-year adjusted profit before tax to £43.5 million, beating analysts’ expectations for £42.9 million.
“However it warned of many headwinds looking forward including inflation which has hit the UK soft drinks market. The Irn-bru maker flagged margin pressures again having raised prices last year to offset the increase in costs.
“Investors are shrugging off the earnings beat, focusing on margin pressures with shares trading lower by more than 1%, landing the stock in negative territory year-to-date.
“Drinks brands have been facing headwinds on two fronts both on the cost side as well as the consumer side with the cost-of-living crisis prompting households to make cutbacks on non-essential items.
“Over recent months, shares have been rebounding, helped by the broader pick-up in market sentiment since the lows in October with shares up almost 15% over the past half year.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown: “The IRN-BRU maker delivered a sweet set of full year results. Revenues grew by double digits on a like-for-like basis, driven by a year of strong growth in core brands.
“The group spent significantly on marketing to promote its take home cocktail brand, Funkin, and its plant-based milk brand, MOMA. These are seen as high-growth areas by Barr, and it’s trying to sow the seeds of growth now so it can harvest the rewards in years to come.
“Despite the acquisitions of Boost and MOMA in recent years, the balance sheet’s still in great shape. A net cash position underpins the group’s investment plans to ramp up production and increase efficiencies in these new brands.
“This should help grow margins over the medium term, but in the short term while this investment is taking place, margins are likely to come under pressure.”